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Earliest of

Advance

Payment

Received

Provision of

ServiceInvoice Raised

GST on SECURITY SERVICE

1. Goods & Services Tax (GST):

GST is the complete mechanism to bring in numerous indirect taxes under one umbrella and thus

rationalising the whole tax system. GST engulfs Central Goods & Services Tax (CGST), Integrated Goods &

Services Tax (IGST), State Goods & Services Tax (SGST), Union Territory Goods & Services Tax (UTGST).

When any sales are made within a state, then CGST & SGST/ UTGST are applied as GST taxes. When

Purchase/ Sales cross the border of a state, then IGST is applied.

2. Exempt supply

Security Services provided to an Educational Institution

3. Types of Business Organisations

Business organisations & operations can be of different types. Security Agency services may be provided by

Private Limited Companies, Limited Companies, LLP, Partnership firms or any other form of organisation.

4. Taxable Event / Time of Supply

Taxable event means the point of time when provision of service will be taxed. In case of security service,

the point of taxable event will be:

5. Place of Supply

If the service is being exported out of India, here the supply will not be the place of consumption of service,

rather it will be the place of actual provision of service i.e. India. E.g. Service is being provided from Delhi

office and is exported directly to client located in USA, the place of supply will be Delhi.

If place of recipient of service, i.e. the client of security agency, is located in India, then:

• Place of supply will be the place of business of the client

• Or, if not identifiable, then location of usual place of residence of client.

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If Security service is provided to a client who is unregistered in GST, then:

• Place of supply will be the place of recipient on record

• If not available, the location of Security Agency.

6. Registration Requirement

o Security Service is a taxable service and requires registration, except if the services are completely

provided to educational institution or gross receipts are less than Rs.20 Lakhs.

o If the services are being provided in other state, then compulsory registration is required.

o If Security Agency is liable to pay GST of inward supplies on Reverse Charge basis, then compulsory

registration under GST is required.

o If there is more than one place of such service provision, all of them are to be registered under GST

having same PAN but different state GSTIN.. Such place of provision of service must be having

reasonable permanent establishment from where services can be provided. Registration is required

only for the places from where supplies are being made.

7. Value of Supply

Value of supply is the transaction value/ contract value on which the bills are raised. This transaction value

can include incidental expenses like packing, commission, interest or late fee/ penalty for late payment or

subsidies but not to include GST. Also, discount in invoices decided after the supply is made cannot be

reduced from transaction value.

If the transaction value/ contract value is not determinable, specifically in the case of providing service to

related party, Transfer Pricing provisions have to be referred for determining arm’s length pricing

according to the rules.

8. What is INPUT

Input means all those services and materials used directly for the purpose of rending the service. In the

present scenario, some of the examples of Input would be:

• Internet facility, Stationery, Consumables

• Manpower, Annual Maintenance

• Computer maintenance services, Insurance of employees

• Etc.

It is important to mention that there are various inputs on which input credit is not available. Such inputs

include:

• Motor Vehicles, Food & Beverages, Outdoor Catering, Beauty treatment, Health Services, Cosmetic &

Plastic Surgery

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• Membership of Club, health & fitness centre, Rent-a-cab, life insurance and health insurance.

• Travel benefits extended to employees on vacation such as leave or home travel concession

• Works contract services for construction of immovable property (except plant & machinery)

• Supplies received for construction of immovable property (except plant & machinery) taken up on

own.

• Taxes paid to suppliers who are under composition levy scheme., any goods or services used for

personal consumption

• Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Taxes paid on account of order by department for wilful default, confiscation or detention in transit.

Confiscation and detention in transit apply in case of goods, hence, it is not applicable on present scenario

of security agency services.

It is to be noted that input tax credit will be allowed before 20th October after the end of financial year to

which such input tax credit pertains or filing of annual return, whichever is done earlier. Last date for

furnishing annual return under form GSTR -9 is 31st December after end of Financial Year. It is hereby

suggested to file annual return by 20th October so that there is no accidental chance of losing any credit.

Apportionment of Credit:

• If input goods or services are used partly for the purpose of providing such security service and partly

for other purposes, credit of input tax will be available only for portion actually used for such service

business.

9. Input of Capital Goods

Capital Goods are those which are capitalised in the book of accounts and are not short-term in nature.

When such capital goods are purchased, the buyer pays excise/ VAT on them. In the present law, the credit

of such taxes or duties paid is available in two years at 50% each. The whole amount of duty/ tax paid is

booked in full, however, while discharging output tax liability, 50% of input credit on capital goods is

available for set-off.

However, in GST 100% credit is allowed at the time of purchase. If depreciation has been claimed on the

tax component of capital goods, input tax credit of such tax component is not allowed.

10. Reverse Charge Mechanism (RCM)

Reverse Charge Mechanism is applicable to all persons registered under GST. Any person registered in GST

takes services or materials from an unregistered person, then such registered person has to pay applicable

GST on such input or input services. Such reverse payment of taxes by receiver of supply is called Reverse

Charge Mechanism. The payer will get credit of such tax paid on reverse charge.

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ISD

ITC

ITC

ITC

ITC

11. Input Service Distributor (ISD)

There are situations when the business is operated from different locations. However, only one office

receives all the invoices of input goods & services. The tax paid on such services by the said office is then

distributed to other working offices according to their contribution in providing the service. This office

which distributes Input Tax Credit (ITC) is called Input Service Distributor (ISD).

Points noteworthy for ISD:

• For distributing such credit, it is necessary that all the offices are registered under same PAN and ISD

is to be registered as ISD while taking registration under GST.

• Mandatory registration of ISD is required under GST regime.

• GST Return of ISD will be GSTR-6 which is to be filed by 13th of the next month.

• Other office to which ISD distributes credit has to accept or reject such credit between 15th – 17th of

the next month.

• Input credit available from services received prior to the day of implementation of GST and invoices

received after the date, such input credit shall be eligible for distribution.

Conditions for distribution of credit by ISD:

• The ISD can distribute credit against a document.

• Excess credit is not to be distributed.

• Credit attributable to a particular office to be distributed to that office only.

• If there are more than one office to whom credit is to be distributed, then, pro- rata distribution to be

done based on turnover.

12. Invoicing

Invoicing for Security service providers is not a very big concern as the provisions are same, however, only

format has been changed. For understanding purpose, a draft format is being enclosed at the end of this

book. Only few major parts to be understood:

a) Service Accounting Code (SAC):

is assigned to each type of services. Depending upon

the exact classification of the service, it is to be

mentioned on the invoice.

b) Type of GST: The invoice format has CGST, SGST and

IGST as separate columns to be filled for tax portion.

13. Payment of Taxes

Tax payments may arise on account of:

• Output tax on supply of services

• Interest, late fee or any other payment

• Tax, interest, penalty as awarded by GST Department officer

• Reverse Charge

• If Services are provided within the state, then CGST + SGST will be

• If Services are provided within the state, then IGST will be

Refer Annexure- 1 for details of GST Payment Forms.

14. Refund

Proper method has been devised for claiming refund for every month

understanding for smooth flow of refund:

• Electronic cash or credit ledger contains details of taxes, interest, penalty, fees etc. paid or to be paid.

The balance after netting off payable and paid tax maybe payable or refundable.

• Refund can be claimed by furnishing returns as specified.

• Documents specifying that payment of such input have

passed on to the customer.

• If such refund is less than Rs. 2 Lakhs, a declaration in place such documentation would be sufficient

for this purpose.

• The Departmental Officer referred to as Assessing Officer, will refund 90% of the total refund, on a

provisional basis until clearance of complete refund based on assessment of documents. Such

complete assessment will be done in 60 days from the date of receipt of applicatio

The order will be passed for this refund in FORM GST RFD

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service providers is not a very big concern as the provisions are same, however, only

format has been changed. For understanding purpose, a draft format is being enclosed at the end of this

major parts to be understood:

de (SAC): This is the code that

is assigned to each type of services. Depending upon

the exact classification of the service, it is to be

Type of GST: The invoice format has CGST, SGST and

IGST as separate columns to be filled for tax portion.

ax payments may arise on account of:

Output tax on supply of services

Interest, late fee or any other payment

ty as awarded by GST Department officer

If Services are provided within the state, then CGST + SGST will be charged in invoice

If Services are provided within the state, then IGST will be charged in invoice

GST Payment Forms.

Proper method has been devised for claiming refund for every month. Following points are worth

understanding for smooth flow of refund:

Electronic cash or credit ledger contains details of taxes, interest, penalty, fees etc. paid or to be paid.

The balance after netting off payable and paid tax maybe payable or refundable.

Refund can be claimed by furnishing returns as specified.

ts specifying that payment of such input have been made and such tax burden has not been

If such refund is less than Rs. 2 Lakhs, a declaration in place such documentation would be sufficient

referred to as Assessing Officer, will refund 90% of the total refund, on a

provisional basis until clearance of complete refund based on assessment of documents. Such

complete assessment will be done in 60 days from the date of receipt of applicatio

The order will be passed for this refund in FORM GST RFD -04.

service providers is not a very big concern as the provisions are same, however, only

format has been changed. For understanding purpose, a draft format is being enclosed at the end of this

in invoice

. Following points are worth

Electronic cash or credit ledger contains details of taxes, interest, penalty, fees etc. paid or to be paid.

The balance after netting off payable and paid tax maybe payable or refundable.

been made and such tax burden has not been

If such refund is less than Rs. 2 Lakhs, a declaration in place such documentation would be sufficient

referred to as Assessing Officer, will refund 90% of the total refund, on a

provisional basis until clearance of complete refund based on assessment of documents. Such

complete assessment will be done in 60 days from the date of receipt of application by the officer.

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Such refund will be paid directly to the applicant by issuing a payment advice in FORM GST RFD -05.

• If default has been committed in filing of returns or payment of any tax, interest etc, the officer may

hold the payment of refund and also can deduct any tax, interest, penalty from the refund amount

before payment of such refund. The order will be in FORM GST RFD- 06.

If the whole of refund is completely adjusted against such pending demands, such details will be made

available in Part A of FORM GST RFD -07.

If officer is of the view that refund is being claimed by fraud and the matter is under litigation at higher

authorities, the whole amount of refund will be on hold. Such order will be made available in Part B of

FORM GST RFD -07.

• If the matter after litigation results in granting of refund, the amount of refund held, will be paid with

interest upto 6% maximum.

• The relevant date from where refund will be counted as eligible will be:

- The date of receipt of payment if services rendered before receipt of payment.

- The date of issue of invoice if payment is received as advance before issue of invoice.

• Where refund arises as a result of any order by authority or court and application for refund is filed

after such order, the same shall be paid with interest upto 9% if refund is not paid within 60 days from

such application.

• Services given to units under Special Economic Zone are to be treated in similar fashion as exports. It

shall be noted that when such service is given to SEZ, a specified officer of SEZ certifies receipt of

services. That certificate is to be kept in record for refund purposes.

• Documents required for refund:

- A statement containing the number of and date of invoices, Bank Realisation Certificate

- Services made to a Special Economic Zone - A statement containing the number and date of

invoices, the evidence regarding endorsement and the details of payment, along with proof.

- A declaration that SEZ unit or SEZ developer has not claimed input tax credit of tax paid by

supplier of such security services.

- A declaration to the effect that burden of Tax, interest or any other amount claimed as refund has

not been passed on to any other person, where amount of refund is less than Rs.2 Lakhs.

- For the sake of knowledge of the reader :- A certificate from Chartered Accountant or a cost

accountant is to be annexed in Form GST RFD – 01, which will certify that burden of tax that has

been claimed as refund, has not been passed on to any other person. Such certificate is required in

case the refund amount is greater than Rs.2 Lakhs.

- When refund becomes due, resulting from order of authority or court, reference number of the

order and a copy of the order.

• Acknowledgement of application for refund filed will appear in FORM GST RFD -02 on portal and

will be available for viewing to the applicant within 3 to 15 days.

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• If there are any deficiencies, such deficiencies will appear in FORM GST RFD – 03 on portal.

• The refund granting is subject to a condition of non- prosecution of applicant for evading tax of

more than Rs.2.5 Crores in the preceding 5 years.

• Where the officer or authority is satisfied that no or part of refund is not allowable, a notice will be

issued in FORM GST RFD -08 asking the applicant to furnish their reply in FORM GST RFD -09

within 15 days. Thereby making final order in FORM GST RFD -06.

• A Ledger is maintained on portal for payable or credit available to be utilised. Refund mechanism to

operate by debiting or crediting the ledger balance.

Refer Annexure – 2 for Summary of Refund Forms

15. Maintenance of database, documents or records:

Database needs to be maintained to ensure smooth data

flow along with processing and feeding of any information

while complying with GST Law. Although complete database

maintenance is case specific, however, major points have

been highlighted:

• Vendor Details: Name, Address, PAN, GSTIN, HSN Code of goods being purchased, SAC (Service

Accounting Code) of services.

• Buyer Details: Name, Address, PAN, GSTIN, SAC (Service Accounting Code) of services.

• Backup of all entries being feeded whether through accounting software or through maintenance of

excel sheets.

• All bills of inward supplies being goods or services consumed, all invoices raised to customers,

Credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers

• Calculation done for netting off output tax liability and input tax credit. In the present case, the

output tax liability will be Zero.

• All applications for refund and their complete files for refund processing, all sorts of

communication with GST department.

• Bank Statements

• Accounts Books to be properly maintained and kept upto date.

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16. Returns to be filed & their timing:

S. No. GST

Return

Purpose Due Date

1. GSTR – 1 Outward Supplies being Security Services 10th of Next Month

2. GSTR - 2 Inward Supplies received 15th of Next Month

3. GSTR – 3 Monthly Return for netting off Output &

Input tax

20th of Next Month

4. GSTR – 4 Quarterly Return for Composition supplier 18th of Next Month after

Quarter

5. GSTR – 6 Return for Input Service Distributor 13th of Next Month

6. GSTR – 9 To be filed by all persons covered under

GST

31st December of Next

Financial Year

*Any Rectification/ omission can be taken care of only in next return.

17. Credit of Existing Inputs

Credit of existing inputs lying as on 30.06.2017, will be carried forward and can be claimed by filing

form GST TRAN -1 by 30.09.2017.

18. How to integrate with GST Returns

Manual Feeding provisions have been made for filing GST Returns with some information being auto-

populated. However, purchasing a recognised accounting software and hiring consultants for monthly

review & filing is much favourable.

Few Other important Facts

o Deemed Export means export to EOU/ STPI/ Consulate/ Embassy etc.

o Export, Supply to Special Economic Zone and Deemed Exports can be viewed under the same light

with some particular differences.

o Once voluntary registration is taken it cannot be surrendered for 1 year.

o Once registration is taken, exemption limit of Rs.20 Lacs do not apply, i.e. all provisions are to be

complied in totality.

o Business organisation must authorise a person for handling compliance for ease of use in terms of

signatures and other verification part including dealing with GST department.

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About the Author:

AS Finance Solutions Pvt. Ltd.

Propelled by Chartered Accountants with an experience

backing of 25 years.

The firm provides expert services in GST, Income Tax,

Accounting, Corporate Laws and Project Finance.

Author can be reached at: contact@financesolutions.in

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Annexure – 1

� Form GST PMT - 01 is a liability register which will show liabilities in terms of tax, interest, penalty,

late fee or any other amount payable.

� Form GST PMT – 02 will show input tax credit available.

� Form GST PMT – 03 will be used by GST Officer for making order of any rejection of refund.

� Form GST PMT – 04 will be used for communicating any discrepancy in tax liability data to the GST

Officer.

� Form GST PMT – 05 is the cash ledger account which will depict tax, interest, penalty, late fee or any

amount deposited or paid therefrom.

� Form GST PMT – 06 will generate challan for entering details of payment for tax, interest, penalty, fee

etc. Such challan will be valid for 15 days.

� Form GST PMT – 07 where payment as per challan has been deducted from bank but challan

identification number was not generated, this form will be used to show the initiation of payment.

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Annexure – 2

Summary of Refund Forms

Sr. No Form Number Content

1. GST RFD-01 Application for Refund

2. GST RFD-02 Acknowledgement

3. GST RFD-03 Deficiency Memo

4. GST RFD-04 Provisional Refund Order

5. GST RFD-05 Payment Advice

6. GST RFD-06 Refund Sanction/ Rejection Order

7. GST RFD-06 Interest on delayed refund order (same as refund order)

8. GST RFD-07 Order for complete adjustment of sanctioned Refund/

order for withholding of refund

9. GST RFD-08 Notice for rejection of application for refund

10. GST RFD-09 Reply to show cause notice

11. GST RFD-10 Application for Refund by any specialize agency of UN or

Multilateral Financial Institution and Organization,

Consulate or Embassy of foreign countries, etc.

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Invoice Format for reference: